I know that many of the oil analysts out there have gone weak on me. Unable to believe in the inevitable re-balancing of the oil market, they continue to see long, flat markets in oil prices coming for the next year, perhaps two. Even OPEC and the IEA, in need to put out conservative projections, are only looking for $60 oil at best by the end of 2017.
You know, I think they’re all wrong. There’s nothing that has proven to be more wrong than counting on an absolute ceiling – or floor – in oil prices in the last decade.
Meanwhile, the wait for what I think is inevitable re-balancing and a real supply shortage from decimated capex over the last three years can be difficult, if not devastating, in the current market of slowing disintegrating oil prices and even weaker oil stocks.
That’s why our discipline of concentrating on independent U.S. oil producers with good balance sheets has seemed correct and prudent. And yet, there are other sub-sectors to consider, even if only for a speculative play. Recently, my interest in Transocean (RIG) was piqued with their sale of their complete jack-up rig fleet for $1.35b.
The entire sub-sector of offshore drilling has not been a happy one and mostly one to avoid. Inventory of rigs for offshore work has greatly overrun demand for many years to come and continues to need cutting. The impetus for offshore assets to be developed has dulled in light of onshore shale assets and the relatively…